NAFTA Has Been Awesome for Mexico????

Of Emperor Tangerine’s many ridiculous statements, none is perhaps more out of touch with reality than his tough talk toward Mexico because they have just eaten our lunch since NAFTA, with life getting so much better there at the expensive of Americans. This is about as true to the lived experiences of Mexicans as the Trump Tower taco salad.

But here in Mexico, there is an increasing belief that Nafta, despite drawing an enormous amount of investment to the country, has been a big disappointment.

“At the end of the day, as a development strategy, it should have led to higher sustained growth, generated well-paid salaries and reduced the gap between Mexico and the United States,” said Gerardo Esquivel, an economist at the Colegio de México. “It has remained well below what was hoped for.”

Mexico’s economy has grown an average of just 2.5 percent a year under Nafta, a fraction of what was needed to provide the jobs and prosperity its supporters promised. More than half of Mexicans still live below the poverty line, a proportion that remains unchanged from 1993, before the deal went into effect.

Wages in Mexico have stagnated for more than a decade, and the stubborn gap between the nation’s rich and poor persists. A majority of workers in Mexico toil in the obscurity of under-the-table jobs at workshops, markets and farms for their survival.

New technologies, meanwhile, have cut many jobs while increasing productivity, which is good news for businesses but a blow to the work force.

“Mexico is seeing exactly the same phenomenon as in the United States,” said Timothy A. Wise, a research fellow at Tufts University. “Workers have declining bargaining power on both sides of the border.”

In part, Nafta’s failure to achieve its potential falls on the Mexican government’s shoulders, experts say. Rather than use the agreement as a launching point to grow and invest in many sectors of the Mexican economy, successive governments viewed the trade deal as a silver bullet for the country’s economic woes.

All of this is not lost on Mexicans, despite their government’s defense of Nafta. A recent poll by Parametría, a respected Mexican pollster, found that more than two-thirds of respondents believed that Nafta had benefited American consumers and businesses, while just 20 percent believed it had been good for them. The poll, consisting of 800 interviews in people’s homes, had a margin of sampling error of plus or minus 3.5 percentage points.

“There is a grand narrative in the United States that Mexico was the great winner of Nafta,” said Fernando Turner Dávila, the secretary of the economy and labor in the industrial state of Nuevo León. “Meanwhile, here in Mexico, they only see the benefits, which are glorified. They never see the downsides, much less talk about them.”

And certainly my own experiences in Mexico do not counter these ideas, not with people in small communities going years without seeing their families because American agricultural policy dumps corn, beef, and pork on the Mexican market, making it impossible for people to farm and forcing them to migrate to the United States for work. Free trade policy has led to as bitterness in Mexico as the United States. Not surprisingly, like in the US government, it’s as much about failures of the Mexican government to plan for what NAFTA would do as about trade itself.

But Nafta was not necessarily the problem. Much of the misstep, experts say, was the Mexican government’s belief that the agreement would be enough to transform the economy all by itself. Thinking of the trade deal as a panacea, the government failed to come up with a broader policy or make the investments needed to use the trade agreement as a lever to transform the whole economy.

Investments in research and development, for instance, have failed to materialize in both the public and private sectors. Government spending on infrastructure has dropped to its lowest level in seven decades, experts say, leaving an unreliable network of ports, highways and even internet connections across the country. Burdensome regulation and corruption stifled investment, while the nation’s banks lent far less than their Latin American peers, leaving small companies to scramble for credit.

Even where Nafta is succeeding, it is not pushing wages up, or creating enough needed jobs.

Similarly, the US government has assumed that free trade would take care of the problems that trade would cause. To say the least, it has not, especially in our older industrial communities. There is nothing per se wrong with significant trade between nations or even necessarily the outsourcing of jobs, if the social and economic safety net is there to ensure that conditions remain good for those who lost their jobs and international regulations to ensure that people overseas are not exploited. Both the American and Mexican governments have failed miserably on these issues.